Components of Deferred Tax Assets and Liabilities

			December 31, 2020
(In thousands)			PR		US		Total
Deferred tax assets:
Tax credits available for carryforward		$	3,003	$	5,269	$	8,272
Net operating loss and other carryforward available			124,355		698,842		823,197
Postretirement and pension benefits			80,179		-		80,179
Deferred loan origination fees			12,079		(2,652)		9,427
Allowance for credit losses			373,010		38,606		411,616
Accelerated depreciation			3,439		5,390		8,829
FDIC-assisted transaction			152,665		-		152,665
Intercompany deferred gains			1,728		-		1,728
Lease liability			22,790		18,850		41,640
Difference in outside basis from pass-through entities			61,222		-		61,222
Other temporary differences			38,954		7,344		46,298
	Total gross deferred tax assets		873,424		771,649		1,645,073
Deferred tax liabilities:
Indefinite-lived intangibles			73,305		37,745		111,050
Unrealized net gain (loss) on trading and available-for-sale securities			67,003		8,595		75,598
Right of use assets			20,708		15,510		36,218
Other temporary differences			50,247		1,169		51,416
	Total gross deferred tax liabilities		211,263		63,019		274,282
Valuation allowance			112,871		407,225		520,096
Net deferred tax asset		$	549,290	$	301,405	$	850,695

			December 31, 2019
(In thousands)			PR		US		Total
Deferred tax assets:
Tax credits available for carryforward		$	2,368	$	5,269	$	7,637
Net operating loss and other carryforward available			112,803		716,796		829,599
Postretirement and pension benefits			82,623		-		82,623
Deferred loan origination fees			2,519		(2,759)		(240)
Allowance for loan losses			405,475		10,981		416,456
Accelerated depreciation			3,439		4,914		8,353
FDIC-assisted transaction^[1]			152,665		-		152,665
Intercompany deferred gains			1,604		-		1,604
Lease liability			22,694		23,387		46,081
Difference in outside basis from pass-through entities			21,670		-		21,670
Other temporary differences			26,554		7,460		34,014
	Total gross deferred tax assets		834,414		766,048		1,600,462
Deferred tax liabilities:
Indefinite-lived intangibles			69,976		36,058		106,034
Unrealized net gain (loss) on trading and available-for-sale securities			15,635		432		16,067
Right of use assets			20,598		21,430		42,028
Other temporary differences			50,194		1,179		51,373
	Total gross deferred tax liabilities		156,403		59,099		215,502
Valuation allowance			100,175		399,800		499,975
Net deferred tax asset		$	577,836	$	307,149	$	884,985
[1]	For the year ended December 31, 2019, the amounts included within the indefinite-lived intangibles and other liabilities include $32.6 million and $37.4 million, respectively which were previously included within the FDIC- assisted transaction line for the Puerto Rico operations. The Corporation determined to separately present these lines to better reflect the nature of the assets and liabilities within the respective lines, after the termination of the FDIC loss sharing agreement.

Reconciliation of Unrecognized Tax Benefits

(In millions)
Balance at January 1, 2019		$	7.2
Additions for tax positions taken in prior years^[1]			9.1
Balance at December 31, 2019		$	16.3
Reduction as a result of lapse of statute of limitations			(1.5)
Balance at December 31, 2020		$	14.8
[1]	The Corporation recorded a deferred tax asset of $8.7 million associated with the unrecognized tax benefit since the uncertainty of the tax position is related to the timing of the tax benefit.

Differences Between Income Tax Expense (Benefit) Applicable to Income Before Income Taxes and Amount Computed by Applying the Statutory Tax Rate in Puerto Rico

		2020				2019				2018
(In thousands)		Amount	% of pre-tax income			Amount	% of pre-tax income			Amount	% of pre-tax income
Computed income tax at statutory rates	$	231,960	38	%	$	306,869	38	%	$	287,717	39	%
Benefit of net tax exempt interest income		(126,232)	(20)			(145,597)	(18)			(97,199)	(13)
Effect of income subject to preferential tax rate^[1]		(10,141)	(2)			(9,562)	(1)			(111,738)	(15)
Deferred tax asset valuation allowance		15,276	2			16,992	2			27,336	4
Difference in tax rates due to multiple jurisdictions		(1,903)	-			(12,888)	(2)			(16,324)	(3)
Adjustment in net deferred tax due to change in the applicable tax rate		-	-			(6,559)	(1)			27,686	4
Unrecognized tax benefits		(2,163)	-			-	-			(1,621)	-
State and local taxes		4,350	-			4,749	1			8,772	1
Others		791	-			(6,823)	(1)			(5,050)	(1)
Income tax expense	$	111,938	18	%	$	147,181	18	%	$	119,579	16	%
[1] For the year ended December 31,2018, includes the impact of the Tax Closing Agreement entered into in connection with the Westernbank FDIC-assisted Transaction.